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Stanford scholars make the case for continued nuclear investment in their new book

Jeremy Carl and David Fedor, research scholars at the Hoover Institution, discuss the state of nuclear energy in the U.S. They analyze nuclear’s benefits as well as the economic and policy challenges it faces.

Nuclear energy, seemingly, has attributes Americans would want in an energy source: It does not produce carbon emissions – which are harmful to the environment – its costs are predictable and there are added security advantages.

Stanford News Service interviewed Carl and Fedor about their new book:

Why has the demand for nuclear energy declined in the U.S.?

Fedor: The textbook response is that electricity is a commodity – like pork bellies or orange juice concentrate on an exchange. There, price is king.

But it turns out that electrons aren’t really commodities after all. Customers, taxpayers, regulators and politicians increasingly care about attributes of the power going on their electric grid – attributes such as carbon and particulate emissions – or whether given power comes from renewable sources. So, we’ve adopted a growing number of subsidies, policies and regulations to guide that otherwise simple, price-based, wholesale power market in particular directions.

Carl: Putting it very bluntly – nuclear, in some parts of the country, costs more than natural gas on the market, but isn’t favored by government policy the same way rapidly growing renewables are – which are also more expensive. It gets no credit in the vast majority of jurisdictions for its lack of carbon emissions because it tends to be unloved by green groups. It also gets no credit for its security attributes, which are considerable. And, finally, our supply chain has stagnated or collapsed. We haven’t completed any new nuclear power plants in almost 30 years and our expertise in doing so has rapidly diminished.

If the demand for nuclear energy has declined, isn’t that the free market at work? Shouldn’t we put more focus on the energies that are in demand?

Carl: We would be the first to endorse this point were electricity a robust and free market. But since the days of Thomas Edison’s deputy, Samuel Insull, petitioning local governments for monopoly right status for their “illuminating companies,” markets for electricity have very much been constructs of their overseeing regulators and legislators. State by state, electric power is allocated using various elements of markets – which can help reduce costs for everyone – but there is no free market for power. There has never been a free market for power. And there are no prospects for there being a free market for power. Not even in Texas!

Fedor: The best, long-run situation would be a power market that offered a level playing field and incentivized those attributes that the public wants – environmental performance, reliability and cost – in a technologically neutral way. Of course, it would be hard for everyone to actually agree on what that sentence means in real life.

Hoover Distinguished Fellow George Shultz, for example, has argued that a revenue-neutral carbon tax – to replace many existing regulations – would be one such approach with potential bipartisan support. But some on the left are reluctant to give up any regulatory authority, and some on the right are not interested in pricing carbon under any circumstances. In the meantime, that means we’re tasked with trying to find ways to improve upon the status quo at the margin through second-best options.

What are the benefits to nuclear energy compared to other sources – natural gas, renewables, etc.?

Carl: This really gets to the point of the contradiction and one of the reasons we started studying the nuclear power situation last year. Nuclear shares many of the same positive attributes that renewables possess:

Air pollution from power generation is estimated to kill about 10,000 Americans each year – nuclear has none.

Nuclear has essentially no carbon dioxide emissions, though surveys show that only about one-quarter of Americans know this.

Costs for existing plants are predictable and don’t fluctuate much year-to-year, which can be useful if thinking about a power generation portfolio that mitigates future risks. One really nice thing about the existing plants is that we’ve, for the most part, already paid for the large cost of constructing them.

Nuclear is also tied at the hip to American defense and geopolitical interests. You’ll often find Navy veterans working in civilian nuclear power plants because they were trained to operate our nation’s nuclear reactors out at sea. Without the capability to run our nuclear Navy, America’s power projection would suffer in fundamental ways. And, of course, since the start of President Eisenhower’s “atoms for peace” framework, American historical, technological and operational dominance in nuclear power has placed us at the center of global nuclear safety and nonproliferation norms; our involvement there has been a very positive part of the international system.

Did the Fukushima disaster have an impact on the use and expansion of nuclear energy in the U.S.?

Fedor: Yes and no. The American policy and regulatory response to Fukushima was measured and prudent compared to dramatic steps taken in other countries. Germany, for instance, worked toward shutting down their entire nuclear fleet, which resulted in additional coal-fired power imports. Some additional regulatory and safety measures were adopted, which along with post-9/11 security upgrades probably contributed to the cost pressures facing the industry. It’s important to remember that Fukushima was almost a worst-case scenario – the fourth most powerful earthquake in recorded history, followed by a huge tsunami. More than 15,000 people were killed in that disaster, but none from radiation.

Fukushima may have shifted U.S. public opinion on nuclear power and that has been seized upon with some success by anti-nuclear advocacy groups targeting a few specific plants for shutdown in California and in New York. Perhaps surprisingly, people’s attitudes toward nuclear are not particularly partisan. A recent Pew poll found a spread of just 17 percentage points separating liberal Democrats from conservative Republicans in their support for expanding nuclear power – a difference of opinion even narrower than that for wind power, often cited for its cross-party appeal.

What policy recommendations could revive the market for nuclear energy?

Carl: A coal plant or a natural gas plant can be mothballed until market conditions or the regulatory environment improves, but a nuclear shutdown today is essentially permanent. In that sense, given the unexpected onset of economic challenges facing nuclear plants, we argue that states should seriously consider enacting term- and cost-limited subsidies for existing plants at risk of closure, similar in scale to those already in place for renewables. In many cases, this may be cheaper than shuttering the plants. In California, when the nuclear plant at San Onofre closed, substitute power sources drove up customer costs by more than $350 million.

Fedor: The federal government may be able to help. For example, American operators might be able to improve the overall grid value of nuclear were they able to ramp up the output of individual plants in response to grid needs, but U.S. regulations and markets don’t currently do a good job of incentivizing such behaviors despite potential public benefit. A motivated administration could make inroads here.

Then, there is innovation. Over the long term, our existing nuclear expertise may develop cheaper, simpler and even safer advanced nuclear technologies that could be used at home and in unexpected global markets. The federal government should be the lead supporter of these long-term but potentially large-payoff bets through consistent research-and-development funding, more nimble technology commercialization partnerships – along the lines of NASA’s recent work with companies like SpaceX – as well as boring but important areas like nuclear technology testing and licensing reform.